Quadratic hedging in affine stochastic volatility models

@inproceedings{Kallsen2006QuadraticHI,
  title={Quadratic hedging in affine stochastic volatility models},
  author={Jan Kallsen},
  year={2006}
}
We determine the variance-optimal hedge for a subset of affine processes including a number of popular stochastic volatility models. This framework does not require the asset to be a martingale. We obtain semiexplicit formulas for the optimal hedging strategy and the minimal hedging error by applying general structural results and Laplace transform techniques. The approach is illustrated numerically for a Lévydriven stochastic volatility model with jumps as in Carr et al. (2003). 

From This Paper

Figures, tables, and topics from this paper.
6 Citations
22 References
Similar Papers

References

Publications referenced by this paper.
Showing 1-10 of 22 references

On the structure of general mean-variance hedging strategies

  • A. Černý, J. Kallsen
  • The Annals of Probability,
  • 2007
Highly Influential
9 Excerpts

Mean-variance hedging and optimal investment in Heston’s model with correlation

  • A. Černý, J. Kallsen
  • Mathematical Finance,
  • 2008
1 Excerpt

Optimal continuous-time hedging with leptokurtic returns

  • A. Černý
  • Mathematical Finance,
  • 2007
1 Excerpt

Varianz-optimales Hedging in affinen Volatilitätsmodellen

  • A. Pauwels
  • Ph.D. dissertation (TU München),
  • 2007
2 Excerpts

A didactic note on affine stochastic volatility models

  • J. Kallsen
  • From Stochastic Calculus to Mathematical Finance,
  • 2006
3 Excerpts

Similar Papers

Loading similar papers…